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Index Finds Strong Remodeling Activity in the Second Quarter

Professional remodeling activity remained at a brisk pace in this year’s second quarter despite a slight dip from exceptionally strong levels at the beginning of the year, according to NAHB’s Remodeling Market Index.

Despite some slackening in the marketplace, Douglas Sutton, Sr., CGR, CAPS, chairman of the NAHB Remodeors™ Council and a remodeler from Springfield, IL, reported that many remodelers are experiencing backlogs. “A year-to-year comparison shows we are set to match last year’s very strong activity,” he said, “and we don’t expect anything less.”

The component of the index tracking current market conditions stood at 53.5 in the second quarter, just about the same as the index’s 53.6 reading for the same period of 2003.

Future expectations in the second quarter were at 55.8, up from 54.8 a year earlier.

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The Remodeling Market Index advanced modestly over the previous year in the South and West and posted the most significant gains in the Northeast. Current market conditions in that region climbed from 52.1 to 58.3 and future expectations rose from 55.6 to 61.4.

The index found activity slowing down some in the Midwest, where current conditions dropped from 54.6 to 52.1 and expectations fell from 55.5 to 50.1.

“With the ongoing favorable interest rates and steady activity in all regions across the board, we expect the market to stay strong,” said NAHB Chief Economist David Seiders. “The RMI is still above 50, which signals that the market remains healthy. And despite a drop from the first quarter, the industry continues posting higher activity than in previous years.”

The market remained steady in terms of minor and major additions and alterations, with virtually no change from the second quarter of 2003. Maintenance and repairs declined slightly from 55.45 to 53.71.

In the “special questions” section of the survey from which the index is derived, participants were asked to break down the costs of a typical remodeling job.

For maintenance and repair work, survey respondents reported that the cost of a job was allocated to the following:

• One third to labor from company employees
• One fourth to materials purchased by the company
• Fifteen percent to subcontractors for labor and materials
• Six percent to sales and marketing and other costs
• Nineteen percent to overhead and profit.

For additions and alterations, the results were:

• About one fourth to labor
• Twenty-eight percent to materials
• Twenty-four percent to subcontractors
• Five percent to sales and marketing and other costs
• Twenty-one percent to overhead and profit.

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